Protesters march towards the Chinese consulate during a rally Friday, May 11, in Manila's financial district of Makati, Philippines. The Philippines and China are in a standoff over Scarborough Shoal which began early April after the Philippine navy accused Chinese boats of illegally fishing in the area.

The South China Sea territorial dispute between China and the Philippines is beginning to take a toll on the Philippine economy, which is dependent on a steady Chinese demand for its products.

The two countries have been locked in a tense standoff since April 10, when a Philippine naval ship attempted to arrest Chinese fishermen working off what is known internationally as the Scarborough Shoal. The Philippines claims the territory is within its exclusive economic zone, but China claims sovereignty over it, and Chinese ships blocked the arrest, ordering the Philippine ship to leave.

In what the Philippines calls an attempt to pressure Manila to give in, China has refused to allow 150 containers of bananas to enter its markets, saying that the bananas are "crawling with insects," The Manila Bulletin reports. Many of the bananas have already been destroyed, costing Filipino exporters $760,000 so far.

The Philippines rejects the claims that the bananas are infested, saying the insect China has cited as the problem attacks coconuts. President Benigno Aquino also invited a Chinese trade delegation to the country to inspect the bananas prior to export. He said that the Philippines would begin exploring alternative markets for its bananas so that it would not be "tied to just one country, where problems could immediately affect our banana industry," according to the Manila Bulletin.

Zhao Jianglin, an economic expert at the China Academy of Social Sciences' Institute of Asia-Pacific Studies, implied to China Daily that China would use economic measures, such as ratcheting up regulations on bananas, to punish the Philippines for not conceding the Scarborough Shoal.

"The notice is a warning to the Philippines. The move of enhancing fruit quality inspections, which is convenient and easy to operate, intends to test the reaction of the Philippines before economic sanctions are introduced. Lengthy inspections or customs declarations will result in the fruit rotting and cause losses for exporters," Mr. Zhao said.

Risks for China

China's strategy also carries with it some risks: China had $251 million in non-financial foreign investments in the Philippines at the end of 2011, much of it in the form of construction projects, and contracted projects are worth an additional $7.9 billion, according to China Daily.

The number of Chinese tourists coming to the Philippines has also plummeted, prompting one of China's three major airlines to cut its daily service to Manila from two flights a day to one. China Southern Airlines told Xinhua that package tours to the Philippines have been canceled in large numbers, particularly since the National Tourism Administration issued "travel safety advice" and the Chinese embassy in the Philippines reported large-scale anti-China demonstrations in response to the dispute over Scarborough Shoal. Most of the Chinese tour groups in the country will leave by tomorrow.

Both in terms of trade and militarily, China has the upper hand in this dispute, with dozens of warships and other vessels now at the shoal, said Scott W. Harold, an associate political scientist at the RAND Corporation.

A lone Philippine Navy ship that had been at the shoal has returned to base for needed repairs, said Mr. Harold. “I don’t think this is going much further for now,” he said by telephone.

“Beijing has an undeniably superior power position and physical control of Scarborough Shoal at present, so they have nothing to gain from using force, and the Philippines is so weak militarily that I think they will be very cautious,” he said.